Barry Thomsen began his entrepreneurial career as a 10-year-old running a paper route and selling lemonade to workers at construction sites. From there, he sold «investing.businessweek.com» and Avon («www.businessweek.com»), delivered pizza, and started and owned a number of businesses that ranged from a small manufacturer to a business forms supplier. During the course of some 30 years as an entrepreneur, Thomsen has observed and experienced many of the problems that occur in the all-important first year of business—a period when the majority of new businesses fail.

The publisher of the Colorado-based Idea-Letter, a monthly compilation of advice targeted at small business owners in newsletter form, Thomsen recently published When the Shit Hits the Fan! How to Keep Your Business Afloat for More Than a Year (Career Press; November, 2007), a catalog of his observations about what can go wrong after opening for business, paired with his solutions.

Recently, BusinessWeek.com’s Stacy_Perman@businessweek.com spoke with Thomsen about surviving those crucial first 12 months. Edited excerpts of their conversation follow.

What happens in a year that makes it the make-or-break-period for a small business?

People spend most of their startup money. They don’t have as many orders as they need to pay their bills. And people don’t anticipate the expenses that come up. Also, most entrepreneurs need to build up their markets and loyalty slowly. Maybe 1% of people have an unbelievable product, but most have to build up their customer base and they end up running out of money before they get there.

What are the three key things that have to happen within the first year so a business doesn’t fail?

Get to know your product, get to know your market, and get good employees. You have to have good people to back you up, and you have to know your target market or you are wasting your time. If you have the wrong market, you have to keep testing to find out what that market is.

What is crucial for an entrepreneur to know when starting his or her business that might help it survive?

They should know what their goals are and what they want out of the business. Do they want to simply make a living? Do they want to end up being a big company like Google («www.businessweek.com»)? Do they want to stay local or sell nationally? They have to have some goals to know what they are going to be and what they are going for.

What is something that often happens during that first year that can overrun a business if it is not dealt with?

One of the easiest things to get behind on is payroll taxes. And once you get behind it starts to mushroom. The IRS won’t come after you right away, but they will get you in six months. Another thing: You almost have to go into business thinking that you are not going to make a fortune initially. In the first year, you need to make a foundation first. And in the beginning you have more bills than you know what to do with.

You say that an owner’s attitude can affect the entire business. How so?

Sometimes owners go into a business thinking, “I’m king. I can do what I want.” It turns out to be the opposite. The people working for you pick up on that attitude, and if you are vague or indifferent with customers they will be, too, and your customers will not come back. It can ruin a whole business.

You also say that losing a big account is not the end of the world—explain.

First, you should never take an account that would ruin your company if you were to lose it. You can lose an account for any number of reasons. A larger account has a lot of expenses. You need to think about what you would do if you lose that account, so that your business will not go down. You can’t let it shut you down. You should have backup sources and not give that big account everything. That way they can’t take everything if you lose that account.

How would you advise someone to deal with competition?

Know what your competition is doing. You can’t run a business and ignore it. If you are a retailer, shop your competitor’s store or send in mystery shoppers to see how they treat customers. Check their Web site to see what they are doing. They might be announcing something new, and you don’t want to be caught off guard. Hopefully, you have something that you are working on and it is better. That way you don’t have to get into a (BusinessWeek.com, 7/19/06), because that’s when everyone loses. You need to be aware of your competitors or they will eventually pass you by.

In this kind of market environment, the prudent technician can only lay out potential support levels. We think that until a price reversal is traced out, with evidence of accumulation by institutions, it is quite hazardous to be guessing on where the bottom may lie.

The S&P 500 has dropped into the top of another pretty good area of support after failing to hold the 1440 to 1460 area. However, we still think this initial support zone is somewhat valid, because the S&P 500 only finished below this area on Friday, and we think Friday’s action represented another in a series of selling capitulations.

If we take out the 1440 level once again, the next area of chart support sits in the 1395 to 1438 range. There are other pieces of technical support in that range, so it makes it that much more important. Long-term trendline support, off the highs over the past couple of years, sits at 1426, very close to Monday’s intraday low.

A 61.8% retracement of the rally off the March lows, targets the 1437 level. The 65-week exponential moving average lies at 1411 with the 80-week exponential average at 1390. If this zone of support is taken out, there is long-term trendline support, off the lows of the past couple of years, at 1330. The top of the next zone of chart support sits in the 1325 area.

The S&P Financial index is down a nasty 15.2% since its February closing high, with most of that decline occurring since mid-July. The index has also fallen into a zone of multiple technical supports. Chart support lies in the 422 to 439 range. Trendline support is at 439, taken out Friday (only one day) and recaptured on Monday. Based on the width of the double top, we could see a measured move down to 421.

The next chart support below the one already mentioned comes in between 371 and 411 while a 38.2% retracement of the entire bull market (since 2002) in Financials targets the 411 level.

Stepping back a bit, we think the overall market is washed out. Put/call ratios have soared, NYSE Short Interest is at an all-time high, Odd-Lot Short Selling has exploded, market sentiment polls have reversed quickly, talk of a potential market crash has picked up quite a bit, the majority of stocks have been thrown out along with financials, and market internals as well as price data are extremely oversold.

In our view, these are all “potential” positives, but it really doesn’t matter in a market filled with fear. That’s why we think it is always smart to let the market tell you that it has finished going down.

Countrywide Financial («www.businessweek.com») and other financial stocks are higher following a Wall Street Journal article which said the White House and the mortgage industry are near a pact that would temporarily freeze interest rates on certain troubled subprime home loans. S&P thinks such a plan would benefit CFC.

Motorola («www.businessweek.com») elects Greg Brown, 47, as chief executive officer. Brown currently serves as president and chief operating officer. Brown will succeed Edward Zander as CEO, and Zander, 60, will continue to serve as chairman until the annual meeting of stockholders in May 2008. S&P maintains hold.

Dell («www.businessweek.com») falls after posting $0.34 third quarter EPS, vs. $0.27 a year ago, on 9% revenue rise. It notes desktop PC revenue fell 1.0%, but revenue from mobility products increased 19%. It says near term results could be hurt by a slower decline in component costs and a seasonal shift in mix to U.S. consumer and international regions. S&P keeps hold. Bear Stearns, Broadpoint Capital cut estimates.

XM Satellite Radio («www.businessweek.com») rises after Bear Stearns says the Dept. of Justice decision on XMSR’s proposed acquisition of Sirius Satellite Radio («www.businessweek.com») is imminent; could come as early as today or Monday. Bear Stearns expects DoJ to announce it will not block the deal, which could provide upside in XMSR shares to $20, SIRI shares to $4.50.

Tiffany & Co. («www.businessweek.com») posts $0.72 third quarter EPS from continuing operations, vs. $0.23 a year ago, on 8% higher US same-store sales, 10% higher international same-store sales, 18% higher total sales. The luxury retailer sees fiscal year 2008 sales growth of approximately 15%, EPS from continuing operations of $2.69-$2.74 (including items).

J.Crew Group («www.businessweek.com») posts $0.42 third quarter EPS, vs. $0.40 a year ago, on 19% higher same-store sales, 21% higher total revenue. Based on better-than-anticipated third quarter results, it raises fiscal year 2008 EPS view to $1.50-$1.52, vs. previous guidance of $1.42-$1.46. S&P reiterates buy.

Zumiez («www.businessweek.com») posts $0.28 third quarter EPS, vs. $0.24 a year ago, on 13% higher same-store sales, 27% higher total sales. It sees $0.92-$0.94 fiscal year 2008 EPS.

Omnivision Technologies («www.businessweek.com») posts $0.51 second quarter non-GAAP EPS, vs. $0.28 a year ago, on 69% revenue rise. It sees third quarter revenue of $220-$240 million, non-GAAP EPS of $0.41-$0.54. S&P keeps hold; raises estimate.

Mentor Graphics («www.businessweek.com») posts $0.10 third quarter GAAP loss (breakeven non-GAAP), vs. $0.03 EPS a year ago, on 2.3% revenue decline. It says revenue timing issues on certain key orders impacted results for the quarter. It sees fiscal year 2008 revenue of $860 million, GAAP EPS of about $.50, non-GAAP EPS of about $1.02. Preliminary guidance for fiscal year 2009 is for revenues of $920 million, GAAP EPS of about $.78, non-GAAP EPS of $1.22.

United States Steel («www.businessweek.com») says its Chairman and CEO John Surma plans to announce the details of a proposed major capital investment program in the Mon Valley during a press conference scheduled for Friday, Nov. 30, 2007, at 2 p.m. at the company’s Clairton Plant coke making operation.

Freddie Mac («www.businessweek.com») prices its $6 billion fixed-to-floating rate non-convertible non-cumulative perpetual preferred stock at $25 a share. The shares have a fixed dividend rate of 8.375% through Dec. 31, 2012. The dividend will then rise to 416 basis points over 3-month LIBOR or 7.875%.

Big Lots («www.businessweek.com») posts $0.14 third quarter EPS, vs. $0.02 a year ago, despite 0.5% same-store sales drop, 1.8% total sales drop. It sees fourth quarter same-store sales to be slightly negative compared with prior guidance of up 1%-3%. It sees $0.81-$0.86 fourth quarter EPS and $1.37-$1.42 fiscal year 2008 EPS from continuing operations. It sets $150 million share buyback.

Longs Drug Stores («www.businessweek.com») posts slightly lower November same-store sales, 1.8% higher total sales from continuing operations.

Alliance Data Systems («www.businessweek.com») confirms that it has not been approached by Blackstone Capital Partners V L.P. or its affiliates regarding any renegotiation of the $81.75 per share cash purchase price to be paid by to holders of ADS common stock under the terms of the agreement and plan of merger entered into on May 17, 2007, among Alliance Data, Aladdin Holdco, Inc. and Aladdin Merger Sub, Inc.

Newmont Mining («www.businessweek.com») agrees to sell its royalty assets and certain other non-core investments to Franco-Nevada Corp. in a $1.3 billion deal. NEM expects to record pre-tax gain from discontinued operations of about $950 million in the fourth quarter in connection with completion of the sale.

Andersons («www.businessweek.com») raises 2007 EPS guidance to $3.40-$3.60 from $3.15-$3.35. It cites further income improvements in the Plant Nutrient Group and continued increases in its grain business and income from its investment in Lansing Trade Group.